By Professor Evelyn S Devadason
The issue raised by the recent US proposal to impose tariffs of 10%-12.5% on imports from trading partners, including Malaysia, under Section 301 of the Trade Act is not whether Malaysia prohibits forced labour domestically.
Rather, it concerns the regulatory framework governing the importation of goods produced with forced labour in third countries and the extent to which such goods may enter domestic supply chains before being exported to the US.
The regulatory gap, therefore, relates to import controls and due diligence requirements for goods linked to forced labour outside the jurisdiction, shifting the focus from labour regulation to supply chain governance. This reflects the increasingly global nature of production networks, where sourcing decisions span multiple countries and jurisdictions.
The implications are particularly significant for the electronics industry, one of the sectors flagged by the US. Its highly interconnected and multilayered supply chains make it difficult to trace the origin of components and verify labour conditions across production stages.
In addition, electronic components are essential inputs for a wide range of downstream industries, including medical devices, automotive manufacturing, telecommunications, aerospace, renewable energy and industrial automation.
As a result, forced labour risks in electronics supply chains can cascade across multiple sectors, amplifying compliance, reputational and market access risks throughout the broader manufacturing ecosystem.
Governance Beyond the Factory Floor
Addressing these risks requires firms to extend oversight beyond direct suppliers to multi-tier supply networks. This involves mapping and tracing raw materials, components and intermediate inputs across second-, third- and lower-tier suppliers, particularly in jurisdictions where labour enforcement may be weak.
Such efforts are challenging because lower-tier suppliers are often less visible and operate within fragmented, cross-border production chains. Meeting rising due diligence expectations therefore requires investment in traceability systems (technology), supplier audits and structured risk assessments. However, these measures also increase compliance costs and require greater disclosure of supplier data, creating additional operational burdens for businesses.
Regional Supply Chains Under Greater Scrutiny
Geopolitical tensions are prompting firms to regionalise supply chains to strengthen resilience and reduce concentration risks. However, the growing use of forced labour-related import restrictions and prohibitions is adding a new layer of complexity to these efforts.
Although supply chain reconfiguration is expected to be gradual given the deeply globalised nature of production networks, increased scrutiny of labour practices has the potential to disrupt regional sourcing strategies.
This issue is particularly significant for ASEAN. While seven ASEAN member states (Malaysia, Indonesia, Philippines, Singapore, Thailand, Vietnam and Cambodia) have been identified as having inadequate measures to prevent the importation of goods produced with forced labour, several countries in the region have also been subject to varying degrees of forced labour-related scrutiny themselves. As importing markets expand restrictions on products linked to forced labour, firms may be compelled to reassess sourcing arrangements throughout the region.
The challenge is especially evident in the electronics sector, where ASEAN manufacturing networks remain closely intertwined with China despite diversification efforts under “China Plus One” strategies. Although final assembly activities have increasingly shifted to Southeast Asia, many upstream inputs and components continue to be sourced from China. This highlights the constraints of regional diversification and raises questions about the extent to which supply chain resilience can be achieved within production ecosystems that remain heavily linked to China.
Meeting emerging trade compliance requirements will therefore require not only greater supply chain transparency but also a broader reassessment of sourcing strategies across regional production networks.
Strengthening Ethical Supply Chains
The growing emphasis on forced labour due diligence and ethical sourcing reflects a shift from long-standing voluntary corporate responsibility norms to enforceable trade-linked requirements. While ethical sourcing is not new, its enforcement through import restrictions and market access conditions has elevated it into a strategic trade issue.
This shift exposes the limitations of relying solely on domestic labour laws. Although Malaysia has a comprehensive legal framework prohibiting forced labour, compliance within national borders is no longer sufficient. Governments and firms are increasingly expected to demonstrate that goods moving through supply chains are free from forced labour risks, regardless of origin, placing due diligence, traceability and supply chain transparency at the centre of compliance efforts.
Responsibility cannot rest with government alone, as sourcing and procurement decisions are ultimately made by firms. Businesses must adopt risk-based due diligence across multi-tier supply chains, supported by stronger contractual safeguards, supplier risk assessments and traceability mechanisms.
Industry associations can reinforce these efforts by developing common standards and supporting small and medium enterprises with limited compliance capacity.
At the policy level, Malaysia can strengthen oversight through clearer sector-specific due diligence frameworks, improved import monitoring and greater transparency in the sourcing of raw materials and intermediate inputs.
However, regulating complex global supply chains has practical limits, particularly in the electronics sector, where production networks span multiple jurisdictions and labour conditions are often difficult and costly to verify.
The growing use of trade measures to address forced labour also raises implementation challenges. Import restrictions are most credible when supported by robust evidence and transparent investigative processes. Yet tracing labour violations through fragmented supply chains remains difficult, creating the risk that compliance burdens may fall unevenly on firms even where evidence is limited or indirect.
Given these constraints, Malaysia should deepen cooperation with ASEAN partners to strengthen labour governance, improve transparency and promote greater alignment of standards across the region. Enhanced regional coordination can help build confidence in ASEAN supply chains while reducing compliance frictions for firms operating across borders.
Ultimately, ethical supply chains are no longer merely a matter of corporate responsibility; they have become an important determinant of market access. As labour and sustainability considerations become increasingly embedded in trade policy, countries with credible governance frameworks and transparent supply chains will be better positioned to attract investment and integrate into evolving global production networks.
For Malaysia and the wider Southeast Asian region, the challenge lies in balancing these rising regulatory expectations with strategic economic priorities and the structural realities of production networks that remain closely linked to China.
The author is a professor at the Faculty of Business and Economics, University Malaya, and Vice-President of the Malaysian Economic Association
